BANKING AND FINANCE | Evaluation on fairness of an interest rate floor clause

On 28 January 2025, the Italian Supreme Court issued decision No. 1942/2025 regarding the possibility to define an interest rate floor clause (the Floor Clause) as unfair (vessatoria) whenever contained in a facility agreement with floating interest rate – originally lower than the amount fixed in the Floor Clause –  and subscribed with a consumer according to the Italian Consumer Code and Article 117 of the Italian Bank Law. The Italian Supreme Court held, among others, that the Floor Clause is aimed, for the lender’s benefit, to fix a minimum interest rate and is not suitable to create any funds flow in favour of any parties and therefore could not be considered a derivative transaction not subject to the provisions of the Italian Consumer Code. Furthermore, on the basis of a previous decision (Italian Supreme Court No. 5657/2023), the Floor Clause does not include an unaware selling of an option floor and cannot be considered as unfair. In fact, the Italian Supreme Court declares that the Floor Clause when introduced in a facility agreement with floating interest rate can be considered as a conditional clause and therefore is a valid agreement permitted under Article 1353 of the Italian Civil Code. Furthermore, if the interest rate of the facility is variable, the Floor Clause must be appropriate to the price, must have univocal content and must be precisely identified, whereas a general reference in the facility agreement is not sufficient in order not to consider the invalidity of such Floor Clause as a consequence of the indefiniteness of object.

Newsletter n. 104 – February 2025